Krugman on how to talk about the estate tax

June 9, 2006

Fortunately, just enough senators had the good sense to defeat an estate-tax repeal yesterday, but today, [tag]Paul Krugman[/tag] offers some good advice about how to talk about the policy.

On one side, a measure that would have increased scrutiny of containers entering U.S. [tag]ports[/tag], at a cost of $648 million, has been dropped from a [tag]national security[/tag] package being negotiated in [tag]Congress[/tag].

Now, President [tag]Bush[/tag] says that we’re fighting a global [tag]war on terrorism[/tag]. Even if you think that’s a bad metaphor, we do face a terrifying terrorist threat, and experts warn that ports make a particularly tempting target. So some people might wonder why, almost five years after 9/11, only about 5 percent of containers entering the U.S. are inspected. But our Congressional leaders, in their wisdom, decided that improving [tag]port security[/tag] was too expensive.

On the other side, Bill Frist, the Senate majority leader, tried yesterday to push through elimination of the [tag]estate tax[/tag], which the nonpartisan Tax Policy Center estimates would reduce federal revenue by $355 billion over the next 10 years. He fell three votes short of the 60 needed to end debate, but promised to keep pushing. “Getting rid of the [tag]death tax[/tag],” he said, “is just too important an issue to give up so easily.”

So there you have it. Some people might wonder whether it makes sense to balk at spending a few hundred million dollars — that’s million with an “m” — to secure our ports against a possible terrorist attack, while sacrificing several hundred [tag]billion[/tag] dollars — that’s billion with a “b” — in federal revenue to give wealthy heirs a tax break. But nothing is more important in the face of a war than cutting taxes.

As a matter of political rhetoric, I think this is exactly right. When we talk about a Republican plan to cut taxes for the hyper-wealthy by hundreds of billions of dollars, making an already ridiculous budget deficit even worse, it’s accurate but the argument sometimes has trouble connecting with the public, which can get lost in the numbers.

[tag]Krugman[/tag]’s approach, however, is more compelling: Republicans won’t spend $650 million on port security, but they will spend more than 500 times that on yet another generous tax cut for Paris Hilton and those in her income bracket.

Krugman calls all of this the “DeLay Principle,” because Tom DeLay once famously said, “Nothing is more important in the face of a war than cutting taxes.” I’d also call this a terrific example of Republican concerns on display for the nation to see.

The GOP has its priorities; are they yours?

This is a great article CB.

Republicant’s. Can’t tell the difference between an M and a B.

  • This is actually quite remarkable in that the only thing we could count on the GOP actually accomplishing is getting their buddies richer. We knew the christopath-baiting and race-baiting and concern for security were only so much crapscreen that they never had any intention of doing anything beyond pandering, but we knew like we know the sun rises in the east they would always be there for a few bucks for their “true constituency” the “haves and have-mores.” That they failed here is something indeed.

  • Republican’ts: Can’t sacrifice a tax break for the already-rich to keep you and our country secure.

    Republican’ts: Can’t leave the a debt-free economy for their children and grandchildren.

    Republican’ts: Can’t secure our ports — too busy selling them to Dubai.

  • The very wealthy benefit from living in a country with the culture, legal system and infrastructure that makes the accumulation and security of such wealth possible.

    Can’t we argue that those who have the most to gain from living in this country as well as the most to protect should carry a fair share of the cost of securing that weath? I’m not for confiscatory levels of taxation on the very wealthy at all but it seems like simple fairness. You have more, you benefit more, you pay more.

  • Can we please have someone in the Senate, anyone, stand up and tell the Republicans “you guys are just idiots. Seriously, collectively, you are dumber than a bag of hammers. You have made this chamber, this building, and all of Washington D.C. more stupid with this action. I can only pray that God have mercy on your soul and our country.”

    Okay, those last two remarks are from Billy Madison, but they ring so true.

  • Republican congressmen are so willing to sell offf this nation’s assets, mortgage this nation’s future, squander millions and billions of dollars and and watch as thousands of others die: all to buy a few thousand dollars in campaign contributions. What a lousy deal for all of us.

  • “And I got “dumber than a bag of hammers” from MST3K” – 2Manchu

    Ah ha! I should have know you were a fellow Mistie. Good on yer, 2Man. 🙂

  • There’s nothing motivating Republicans to increase security because, oddly enough, as the nation becomes less secure the people turn more to them because of their mythical ‘strong on defense’ stance. Additionally, fear will drive more people to hyper-religiousity which also provides a greater benefit to the Republicans.

    It probably can’t last forever, but long enough to stack the courts, and wreck the economy. We will pay for the last several years of greed and disregard for many years to come.

  • I keep seeing comments on this site that the “hyperwealthy” would pay no tax if the estate tax were repealed. Hell, they don’t pay estate taxes now anyway because their wealth is invested in tax-free trusts. Just ask the Kennedys.

  • Can’t we argue that those who have the most to gain from living in this country as well as the most to protect should carry a fair share of the cost of securing that weath?

    Can, should, and do. It’s a great response to wealthy friends and associates who spew anti-tax rhetoric.

    At the ame time, our government is inefficient at how it uses our tax dollars, and as a nation we are taxed too much, IMO.

  • Fallenwomen,
    The issue isn’t what gets spent where, the issue is that the GOP is willing to overlook national security in the name of tax breaks. If they had funded for both port security and tax cuts for the Kennedys, while fiscally irresponsible, it would have been a hell of a lot better. But when they tell the American people that between the two, an estate tax cut is more important, they are undermining the war on terror and our country’s safety.

    Curmudgeon
    It still is and will always be my favorite show. Now I know what a sidehack is, thanks to them

  • I keep seeing comments on this site that the “hyperwealthy” would pay no tax if the estate tax were repealed.

    I have been unable to find those comments. I only found one by hark in April that mentioned the rich paying no taxes,except on realized gains.

    Have the Kennedys told any other rich people about their ingenuous trick!? Is this a family secret?

    Would you support a change to the law so that no one could do this, or do you want the legislature to enact a one-off law just targeting Kennedys?

  • There are only about 3 things that I agree with the Republican party on. One of them happens to be the repeal of the estate tax. This isn’t a windfall for the rich as so many like to falsely portray it. The rich can afford the means necessary to shelter their assets from an estate tax. The common person can’t.

    I remember clearly when my grandfather died, we had to sell the family farm, which had been in our family for generations, to pay the estate tax. Not to mention that an estate tax is equal to double-taxation (after all, the land had been taxed for years and all assets gained were purchased with income already taxed.) The system as it exists currently HURTS lower-and middle class people much more than the “rich.” If Washington, particularly the spend-happy Republicans in power, would get rid of much of the pork, we could easily afford this.

  • Gary,
    How long ago was your grandfather’s death? No one wants to screw small businesses or farms, but I believe that there have been two tweaks of the estate tax that dealt with that very issue. I think (not positive) that estates below a $2M value are exempt. 2002 IRS stats indicate that only 1.17 percent of americans left a taxable estate that year.

  • I mean no offense in light of your personal history Gary, but the exemption level for the estate tax is presently so high that it simply doesn’t hit the lower and middle class. If your farm exceeded that threshold, while it may not have felt like it and it may not have been liquid, your family assets exceeded those considered “lower or middle class.”

    Yes, the estate tax may be “double taxation” viewed from the perspective of the decedent or the decedent’s property, but in reality it is a tax on those assets becoming income in the hands of the beneficiary — that person is not taxed twice. (If this is “double taxation” so is virtually every other tax — my employer is taxed on its revenues, which are used in part to pay me, then I am taxed on my income, which I spend on a car, for which I pay sales tax and both the manufacturer and the dealer pay tax, etc etc etc.)

  • I really don’t understand the estate tax. How come some super rich people can avoid it?

    Look at the owners of Fidelity, the big mutual fund company.

    How did the father manage to give about $6 BILLION, with a B, to his daughter without any gift or estate tax payments. The gift tax on that should be at least $1 BILLION. Yet, it appears that they didn’t pay any.

    I think we should figure out a way to make sure that everyone pays the estate tax and not let people avoid (Evade?) billions in taxes.

  • Gary,

    One question about selling the family farm: Was the sale brought about by the burden of the “federal estate tax” or was it because the “estate tax” in your grandfather’s state put a helluva bite on the estate? My wife inherited from a family member, and our state’s estate tax put a noticeable bite on the estate–the federal government didn’t touch it.

  • The exemption for the Federal estate tax has been raised in recent years, and in 2010 there will be no Federal estate tax. However, the exemption in 2011 will revert to what it was before the exemptions were raised several years ago. Also, in 2010 the basis of any stock that is inherited remains what it was prior to the death of the owner. Currently, stock that is inherited enjoys a stepped-up basis. For example, if the stock I inherited was purchased for $10.00 per share and its selling price on the day of death of the owner was $20.00, the heir’s basis is $20.00. In 2010 the basis will be $10.00, and if the heir wants to sell that stock at $20.00, he will have to pay capital gains of $10.00 per share. So that means more tax revenue.

  • “So that means more tax revenue.” – Fallenwoman

    Cool!

    In case no one has shown you a graph, we have built in systemic deficits for as far as the account can project. We need to get out from under that.

    I’m not against tax reform, but I believe we should pay for the Government we demand.

    I’m not waiting for the Jubalee to erase all debts.

  • It’s a nice argument he makes, but it’s missing an important element.

    George Bush has not passed a single dollar in tax cuts, and we should not call what he has done tax cuts.

    What he has done – and we can use a catchy name for ir – is to borrow more. When he ‘cuts taxes’ by $70 billion, what he’s actually doing is the same as paying $70 less on our bills so that we have the money but owe that much more plus interest later.

    He’d have to balance the budget and cut spending before he can pass a dollar of tax cuts. He has not done so. (Clinton did).

    A limit on the effectiveness of Krugman’s argument is that you have to understand how right-wingers think. It’s not that they support the republicans so much as that they hate the democrats. No matter how bad the republicans get – the Schiavo travesty, not helping n Katrina, etc. – they have the idea that ‘but the democrats would be worse and lose our country’.

    The imagine a 9/11 every week as the democrats get rid of defense and appease everyone in the world – in other words, the republicans have a nearly unlimited license to do anything and keep their base’s support, because ‘the democrats would be worse’, they are taught to think. When they say they think the republicans are corrupt idiots too, they feel ‘bi-partisan’.

    What’s happening for them in fact is a loss of real belief in and love for democratic government at all – they come to think as Reagan said ‘the government is the problem, not the solution’, and they embrace every right-wing ‘more power to the private corporate sector’ notion that comes along thinking therein lies freedom and prosperity.

    It’s how someone like a Bush can start to ignore the law and constitution and get away with it with these people – they have just stopped caring all that much about the government, and since they figure that the target of its actions will be ‘the bad guys’ and not them, why not let the government prevent more 9/11’s?

    Meanwhile, the democrats are thinking ‘hey, we found this really neat comparison between port security and the estate tax, now that’s so logically persusive that the republicans will just have to see things our way and vote with us’. Think they’ll be disappointed?

    Seems to me we have got to either work towards a fundamental shift in the public’s perceptions about government and the republican party, not just the anecdotal ‘wow they screwed that up’ but seeing them as a force threatening America, or at least some effective manipulations.

    I’m reading a good book now about how the republicans were in a holding pattern of losing elections in the FDR/Truman era; every election they couldn’t get the public to oppose the liberal approach to government they’d come to like, and they couldn’t get voters to choose them with the argument that republicans would offer the same programs but somehow do it better.

    So, in the late 40’s, they found the magic bullet, national security, creating the myth that Yalta had been a disaster and only republicans understood how serious the threat was. Following a time when the nation felt that the world would have been better off had the threat of Hitler been recognized earlier, this argument had some power, and it worked.

    The next thing you know, we’d built the huge, permanent military industrial complex we have today – the one that Eisenhower saw was a danger to warn the nation about in his farewell speech, as even the relatively anti-war Kennedy won on a platform that we weren’t building enough nuclear missiles.

    The democrats aren’t terribly unlike the republicans in the early 40’s, in search of an issue to get public support.

    To some extent, that issue can be ‘my gosh, aren’t the republicans incompetent’, but as noted above, there are limits to how well that argument will do – and the republicans should be able to put better people in office than Bush and crew, reducing the issue of incompetence.

    One thing, for example, that the democrats need to do is to update their social vision from the 60’s. For much of the public, their feeling is that civil rights should be about ending the discrimination that existed before 1965, and not a permanent, unlimited policy of ‘we always just have to do more for minorites’. They begin to vote against bad, rather than for good.

    For them, lacking a clear social vision, they think the democrats are about nothing more than handouts for their own sake and for buying votes, and radical ideas like reperations; and since the republicans are fully signed up to the ‘non discrimnation’ principle, it’s better to just stick with them.

    The democrats’ unmet obligation is to sell the people on the wrongs that continue, and the solutions that make sense.

    Instead, it’s hard to find a democrat speech which doesn’t sound like it’s filled with 1960’s airy platitudes on race.

    The democrats have the right programs; helping the poor and minorities is the right thing to do. But they don’t do much in contering the republicans’ talking points about the ideas that the minorities are causing their own poverty. On the surface, there’s some truth to that; it takes a deeper understanding of the issue to see why the government can help the situation.

    For the voter, when in doubt, the difference, they think, is money in their pocket by supporting the republicans who won’t do the poverty programs – and that’s what they’re seeing in government rather than the huge money grab by the most wealthy. It’s as if it’s invisible, and too many liberals are quiet as they let the phrase ‘class warfare’ stop them from discussing.

    When a snake oil man comes to town, and some of the citiens say he’s a phony, someone’s gonna get hurt. There’s no more middle ground to avoid a battle; either the snake oil is a crook and deserves major wrath, or the citizens are foolish people who would prevent the city from getting critical medicine if they had their way. Someone needs to be shut up.

    As long as the snake oil salesman van keep the people under his sway, the whistleblowers are in danger. The analogy applies in that as long as the crooks on the right can keep the public in their sway with notions that ‘tricke down economics’ works and such, and that the whistleblowers want to destroy the economy – why, they’re probably commies – the American people don’t really listen much to the whistleblowrers. The snake oil people largely control the media. It takes a lot to get the public to see the issues another way. Paul Krugman is one small step in the right direction, but we should remember how it is only that.

    The battle won’t be won on clever and true anecdotal arguments. It’s going to take a major shift against the prevailing ‘common wisdom’. The liberals are awfully pleased about Bush’s 29% approval rating, but they fail to realize how much of the negative is against his competence and not his ideology, and even from some who think he’s ‘too liberal’.

    We need nothing less than the equivalient of the republicans’ finding national security as an exploitable issue.

    And look at all the harm that caused – that issue created so much pressure that the republicans didnt’ even have to be in power to cause the democrats to be pressured to make mistakes over it, from Truman’s huge militarzation to LBJ’s feeling he could not avoid Viet Nam (he may have been right, considering 1965 public opinion).

    Kennedy was only barely able to resist the pressure – he wasn’t in the bay of pigs – and could only withdraw from Viet Nam after he was in his second term not facing re-election. But none of this is the ‘popular view’ among many Americans – they’d just see Truman as ‘acceptable’ and LBJ as ‘weak for not really letting the military win the war’.

    • Comments are closed.